A separation or divorce can be a challenging time for the individuals involved. Emotions run high and both parties are understandably concerned about both securing and dividing their assets. But there are often details that go overlooked and may slip through the cracks until it’s too late.
For Helen Edwards, director at K3 Legal, it’s crucial to pick up on these details as soon as possible. Property and other substantial assets are often at the forefront of people’s minds, but there are other key decisions that need to be made, such as altering wills and reviewing insurance policies.
“As a lawyer, you should be thinking about these factors from the moment the client informs you of their decision to separate,” says Edwards. “Clients will be dealing with a difficult time in their lives and accordingly can be quite emotional. They’re not necessarily in a frame of mind to do it themselves, so lawyers need to be encouraging and helping their clients through that process.”
Essentially, Edwards says, a relationship break-up is a time not only for a stocktake of assets and liabilities – it is also the time for some future asset and estate planning. Edwards points to several key factors:
If you have been married or in a civil union, then in the absence of a separation order or an order dissolving that marriage or civil union, a separation will not have any legal effect on your existing will.
“It’s very common to name your spouse as executor and primary beneficiary of your estate, so this should be amended immediately in a separation,” says Edwards. “It’s easy to amend your will again if necessary. But it’s best to get a new, more suitable will in place as soon as possible.”
“Life insurance is also important, as often there are two policies in place with each spouse owning the other’s policy,” says Edwards. “If something goes wrong, a policy will be paid out to the owner of the policy rather than the deceased’s estate – which can be problematic if it’s being distributed to an ex-spouse or partner.”
Clients need to check these details. They may also wish to use the opportunity to review with their financial adviser any other insurances they have, such as trauma, income protection and mortgage insurance, to see whether these remain relevant and appropriate.
Edwards is quick to point out that this is not always a simple process and may involve in-depth discussion. For example, there may be complexity if the client was in a new relationship with someone else prior to separating from their original spouse or partner.
“Given the increasing number of blended families in New Zealand, clients should be encouraged to be bold and address these matters prior to or as early into a new relationship as possible,” says Edwards. “Advice should be given and measures taken to assist clients with ensuring their separate property will remain separate. This advice can be given and measures put in place even if the client’s former relationship property settlement hasn’t been completed yet.”
Ultimately, a principal object of a lawyer’s attentions after a separation should be to help the client protect their assets as efficiently as possible, says Edwards.
“People are often in a rush to deal with the big issues and forget about basic housekeeping,” says Edwards. “But it’s best to catch these other details early on, and before they could have a serious impact further down the line.”